business model innovation in the water and sanitation … · sarvajal (franchisor) (5000 $ / 2600$)...

08.06.14

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grafikdesignmarkstein:b

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endeva

Business model innovation in the water and sanitation sector

Heiko Gebauer


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endevaCharacteristics of business models in the water and sanitation sector

• Water is a human right

•  Conflicting goals between non-profit and for-profit organizations

• Middle income segments also lack water and sanitation services

•  Low-experience goods

•  (No) poverty penalty

• Mostly decentralized systems

•  System perspective Usage Transport Treatment Reuse

Characteristics Water & sanitation chain

Access Treatment Distribution

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Source: Yunus et al. 2010

All organizations need business model innovation

Non-profit organization

Social business

Profit-maximizing businesses N/A

No recovery of invested

capital

Repayment of invested capital

Financial profit maximization

Social profit maximization


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Business model canvases for profit-oriented businesses


Social business

Profit-maximizing businesses

N/A

Key partners

Key Activities

Key Resources

Value Proposition

Customer Relationship

Customer Segments

Distribution & Marketing

Revenues Costs

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Non-profit organizations operate two differently oriented business models


Social business


N/A

Key Non-program partners

Key Non-program Activities

Key Non-Program

Resources

Donor-focused Value

proposition

Donor Relationship

Donor Segments


Revenue Streams

(Donations)

Non-program Costs

Donor model canvas Key

partners Key

Activities

Key Resources

Mission offering (Benefit

proposition)

Beneficiary Relationship

Beneficiaries Segments


Impact metrics

Costs

Beneficiary model canvas


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endeva


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endevaGoing from pilot to scale?

Penetrating markets

Creating markets where needs exist

Business model innovation

Time

Pilot

Scaling-up

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endevaPilot phase for business models

Value capture (How do you finance the pilot?) - Social goals >> Economic goals Customer identification (What customers do we target?) - Many, lowest to low-income and well-known

Value creation (How do you deliver value to the customers (beneficiaries)? - Network-based & orchestration Customer engagement (How do you engage with the customers?) - Passive, homogenous, and standardized

Source: Water for people


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endevaExperiment with different business model options!

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endevaIs it reasonable to sell/rent to existing businesses?

Gulper Maker

Existing emptying

businesses

Households

Technical skills

Business skills

Wastewater treatment

plant

- Sell - Rent

- Manufacturing costs - Sales costs

- More households - More revenue


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Technical skills

Business skills

New emptying

businesses - Rent - Capacity building

(technical & business skills)

- Emptying fees (ê)

Gulper Maker

Existing emptying business

Households


plant

- Manufacturing costs - Sales costs (é)

How would you start new emptying businesses?

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Technical skills

Business skills

New emptying

businesses - Emptying fees (ê)

Gulper Maker


Households


plant

- Manufacturing costs

Support organization

- Rent - Capacity building


Water for people develops new emptying businesses …


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Technical skills

Business skills

New emptying business

- Emptying fees (ê)

Gulper Maker


Households


plant

- Manufacturing costs (ê)


- Rent (ê) (give it away for free

- Capacity building (technical & business skills)

Donor

- Technical advice

Water for people relies on a funding model …

- Funding

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endevaExperiments lead to a pilot business model

Donor-driven business model

Profit-oriented business model

Profit-oriented business model

MC (+ Margin): $150

Two latrines per day: Income: $120 (200l for $10) Expenses = $4 (dumping) + $40 (truck) + $16 (fuel) +$32 (wages) = $92 Profit = $120 – $92 = $28 Payback period = $150 + $120 (barrels)] / $28 = 10 work days

Source: Water for people


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endevaScaling-up needs continuous business model innovations

Business model innovation

Scaling-up

Value capture - How do you finance the scale-up? Customer identification - What customers do you target? Value creation - How do you deliver value to the

customers (beneficiaries)? Customer engagement - How do you engage with the

customers?

Scaling-up

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New emptying businesses

Gulper Maker


Households


plant


Donor

Shared transportation

Optimizing value creation through shared transportation …

- Truck financing -  Intermediate

storage - Capacity building



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endevaPilot phase concentrates on the lowest-income segment, ….

Manu-facturer

Distribution & marketing

Customers

NPOs

Door-to-door

Retailers

Micro-Finance Institute

Door-to-door

Retailers

Commu-nities

2/3

1/3

3‘500 per month $20 MC

$12.5

For free or highly subsidized <<$12.5

1-5 $ / person (daily income) Market penetration 3.5%

MC – Manufacturing costs NPO – Non-profit organization

Source: Various PATH reports

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endeva… but scaling-up needs more valuable customer segments

Manu-facturer


Customers

NPOs

Door-to-door

Retailers

Micro-Finance Institute

Door-to-door

Retailers

Commu-nities

$17 MC

$22

≈$5 / person (daily income) Customer referrals

MC – Manufacturing costs

When offered together with a finance solution Super Tunsai outsells Tunsai by 7:1

Source: Various PATH reports


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endevaChanges in customer identifications …

Sanergy Sanitation Franchisee

Users

Pay-per-use

Investment Franchising fee

Marketing, branding

Manufacturing

Transportation

…

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0

500

1000

1500

2000

2500

3000

3500

4000

Externalize the operation and water sales

Installed water systems

2008 2010 2014 2016 2012

...

Sarvajal (Franchisor)

(5000 $ / 2600$)

Micro- entrepreneurs (Franchisees) 500 $ (40% of

revenue)

Communities (Villages –

3’000) 0.12 $ for 20

liters 1 : n 1 : m

- Maintaining and monitoring the systems -  Bright brains to repetitive gains - Franchisee strategy tool / approach to balance own /

borrowed capital

Bank Micro-credit institute

Source: own interpretation and interviews. Based on Macomber and Sinha (2012)


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endevaIs it possible to change from non-profit to profit?

Scale-up phase

$-

$500

$1'000

$1'500

$2'000

0

50

100

150

200

250

Aug

-09

Sep

-09

Oct

-09

Nov

-09

Dec

-09

Jan-

10

Feb-

10

Mar

-10

Public toilets Communal toilets

Household toilets Contracted toilets

Revenues (Toilet fee) Revenues (Compost)

Total revenue

Initial: SOIL as a non-profit relies on a fully donor-driven & beneficiary business model Ongoing: Partly donor and customer driven business model

Business model


Social business


N/A

0

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endevaWhat additional sales and administrative costs would you have to cover?

Direct manufacturing costs Sales and administrative costs

...


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endevaIT can reduce costs dramatically

… to the Russian space pencil ...

From a Nasa Astronat pen …

… reaching the smart phones, tablets, and

apps

Picture: Thanks to x-runner

Source: Nextdrop.org

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endevaLessons learned in the scaling-up

Scaling-up Phase

Value capture - How do you finance the scale-up? Customer identification - What customers do you target? Value creation - How do you deliver value to the

customers (beneficiaries)? Customer engagement - How do you engage with the

customers?

Lessons Learned

Diversify – Multiple income streams -  economic = social Costs & revenues - IT, payments, micro-credits Extend customer segments - new markets, middle income,

aspirational Externalize marketing & internalize manufacturing - Franchising, NPOs, customer referrals Actively manage your customers - Customize, share of wallet, IT


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endevaAgenda – Afternoon

Time Content 13:30 Group Work:

Developing solutions for the business model challenges 14:30 Group presentation:

Key findings from group work 15:15 Coffee Break 15:45 Presentation:

Business ecosystems for creating social and economic value 16:15 Group discussion:

Business ecosystems for water and sanitation services 16:45 Individual Reflection & Feedback 17:15 Summary 17:30 Apéro

business model innovation in the water and sanitation … · sarvajal (franchisor) (5000 $ / 2600$)...

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